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The VA launched a new program last year, MSPV-NG, to streamline the way its medical centers buy supplies for treating 7 million vets.

As with any organizational transformation, the program's success depended on having a strong strategic plan, stable leadership, good communication, and stakeholder buy-in. But as we report here, the VA was missing these elements when it launched the program; as a result, the program has yet to achieve key goals of cost savings and greater efficiency.

We made 10 recommendations for how the VA can better manage future phases of the program and improve its purchasing.

Exterior photograph of a Department of Veterans Affairs medical center.

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What GAO Found

The Department of Veterans Affairs (VA) established the Medical Surgical Prime Vendor-Next Generation (MSPV-NG) program to provide an efficient, cost-effective way for its facilities to order supplies, but its initial implementation was flawed, lacked an overarching strategy, stable leadership, and sufficient workforce that could have facilitated medical center buy-in. VA developed requirements for a broad range of MSPV-NG items with limited clinical input. As a result, the program has not met medical centers' needs, and usage remains far below VA's 40 percent target. VA also established cost avoidance as a goal for MSPV-NG, but currently only has a metric in place to measure broader supply chain cost avoidance, not savings specific to MSPV-NG. Also, starting in June 2015, VA planned to award competitive contracts for MSPV-NG items, but instead, 79 percent were added using non-competitive agreements. (See figure.) This was done primarily to meet VA's December 2016 deadline to establish the formulary, the list of items available for purchase through MSPV-NG.

Total Number of Items by Award Type on MSPV-NG Formulary, Jan. 2017

The roll-out of MSPV-NG ran counter to practices of leading hospitals that GAO spoke with, which highlighted key steps, such as prioritizing supply categories and obtaining continuing clinician input to guide decision-making. VA has taken steps to address some deficiencies identified in the first phase of implementation and is considering a new approach for this program. However, until VA addresses the existing shortcomings in the MSPV-NG program, such as the lack of medical center buy-in, it will face challenges in meeting its goals.

Medical centers often rely on emergency procurements to obtain routine goods and services—some of which could be made available at lower cost via MSPV-NG. Sixteen of the 18 contracts in GAO's sample were not competed, which puts the government at risk of paying more. For instance, one medical center procured medical gas on an emergency basis through consecutive non-competitive contracts over a 3-year period. VA policy clearly defines emergency actions; however, inefficiencies in planning, funding, and communication at the medical centers contributed to emergency procurements, resulting in the contracting officers quickly awarding contracts with no competition.

Why GAO Did This Study

VA medical centers spend hundreds of millions of dollars annually on medical supplies and services. In December 2016, VA instituted a major change in how it purchases medical supplies—the MSPV-NG program—to gain effectiveness and efficiencies.

GAO was asked to examine VA's transition to the MSPV-NG program and its use of emergency procurements. This report assesses the extent to which (1) VA's implementation of MSPV-NG was effective in meeting program goals, and (2) VA awards contracts on an emergency basis. GAO analyzed VA's MSPV-NG requirements development and contracting processes, and identified key supply chain practices cited by four leading hospital networks. GAO also reviewed a non-generalizable sample of 18 contracts designated in VA's database as emergency procurements with high dollar values; and met with contracting, logistics, and clinical officials at 6 medical centers, selected based on high dollar contract obligations in fiscal years 2014-2016 and geographic representation.

For more information, contact Shelby S. Oakley at (202) 512-4841 or oakleys@gao.gov.

Recommendations for Executive Action

Status: Open

Priority recommendation

Comments: VA concurred with this recommendation. VA reported in August 2018 that it was in the process of developing, documenting, and communicating a strategy and anticipated completing these steps in September 2018.

Recommendation: The Director of the MSPV-NG program office should, with input from the Strategic Acquisition Center (SAC), develop, document, and communicate to stakeholders an overarching strategy for the program, including how the program office will prioritize categories of supplies for future phases of requirement development and contracting. (Recommendation 1)

Agency Affected: Department of Veterans Affairs

Status: Closed - Implemented

Comments: VA concurred with this recommendation and hired a program office director in May 2018.

Recommendation: The Veterans Health Administration (VHA) Chief Procurement and Logistics Officer should take steps to prioritize the hiring of the MSPV-NG program office's director position on a permanent basis. (Recommendation 2)

Agency Affected: Department of Veterans Affairs

Status: Open

Comments: VA concurred with this recommendation. in August 2018, VA appointed a Chief Acquisition Officer. We are conducting additional follow-up with VA to determine whether this official is a non-career employee. VA had noted in prior contact with GAO that it was identifying alternatives that would enable it to be in compliance with the Services Acquisition Reform Act, which stipulates that the Chief Acquisition Officer must be a non-career employee.

Recommendation: The Secretary of Veterans Affairs should assign the role of Chief Acquisition Officer to a non-career employee, in line with statute. (Recommendation 3)

Agency Affected: Department of Veterans Affairs

Status: Open

Comments: VA agreed with this recommendation. VA reported in January 2018 that it had developed a tool (Medical Product Data Bank's eZSAVE program) to improve the matching process and trained staff on the tool. As of August 2018, however, VA has not specified what steps it has taken to define the roles of clinicians and Clinical Product Review committees in the matching process.

Recommendation: The Director of the MSPV-NG program office should provide complete guidance to medical centers for matching equivalent supply items, which could include defining the roles of clinicians and local Clinical Product Review Committees. (Recommendation 4)

Agency Affected: Department of Veterans Affairs

Status: Closed - Implemented

Comments: VA concurred with this recommendation and the MSPV-NG program office took steps in early 2018 to communicate the criteria and processes for adding and removing items from the catalog, such as using the program's newsletters to explain the process for adding items and to notify staff when items were removed.

Recommendation: The Director of the MSPV-NG program office should, with input from SAC, communicate to medical centers the criteria and processes for adding or removing items from the formulary. (Recommendation 5)

Agency Affected: Department of Veterans Affairs

Status: Open

Comments: VA agreed with this recommendation. VA reported in August 2018 that its Supply Chain Data and Informatics Office developed a new tool to calculate cost avoidance due to the MSPV-NG program and is evaluating the tool's effectiveness in partnership with the MSPV-NG program office. VA anticipated completing its evaluation in December 2018.

Recommendation: The VHA Chief Procurement and Logistics Officer, in coordination with SAC, should calculate cost avoidance achieved by MSPV-NG on an ongoing basis. (Recommendation 6)

Agency Affected: Department of Veterans Affairs

Status: Open

Comments: VA agreed with this recommendation. VA reported in August 2018 that it has replaced the Phase 2 award strategy with a new contracting strategy that modifies existing prime vendor contracts. The new strategy is designed to increase the number of items available for order. VA plans to have the new strategy in place by December 2018.

Recommendation: The MSPV-NG program office and SAC should establish a plan for how to mitigate the potential risk of gaps in contract coverage while SAC is still working to make competitive Phase 2 awards, which could include prioritizing supply categories that are most likely to yield cost avoidance. (Recommendation 7)

Agency Affected: Department of Veterans Affairs

Status: Open

Comments: VA agreed with this recommendation. VA reported in August 2018 that it is in the process of developing a strategy to improve the incorporation of clinical input into its requirements development and standardization processes. VA anticipates completing the strategy in January 2019.

Recommendation: The VHA Chief Procurement and Logistics Officer should use input from national clinical program offices to prioritize its MSPV-NG requirements development and standardization efforts beyond Phase 2 to focus on supply categories that offer the best opportunity for standardization and cost avoidance. (Recommendation 8)

Agency Affected: Department of Veterans Affairs

Status: Open

Comments: VA agreed with this recommendation. VA reported in August 2018 that the MSPV-NG program office continues to partner with the Supply Chain Data and Informatics Office to provide VA medical centers with the tools and information needed to identify alternative procurement strategies for items purchased on an emergency basis. The program office is also developing training programs on inventory management practices to decrease the number of emergency orders placed. VA anticipates completing these activities by December 2018.

Recommendation: The VHA Chief Procurement and Logistics Officer should direct Veterans Integrated Service Network (VISN) Network Contracting Offices to work with medical centers to identify any opportunities to more strategically purchase goods and services frequently purchased on an emergency basis. For example, offices could do this by analyzing existing data. (Recommendation 9)

Agency Affected: Department of Veterans Affairs

Status: Open

Comments: VA agreed with this recommendation. VA reported in August 2018 that the MSPV-NG program office continues to partner with the Supply Chain Data and Informatics Office to provide VA medical centers with the tools and information needed to identify alternative procurement strategies for items purchased on an emergency basis. VA also plans to determine whether such items should be added to the MSPV-NG catalog. VA anticipates having these tools and information in place by December 2018.

Recommendation: VHA Chief Procurement and Logistics Officer should analyze data on items that are frequently purchased on an emergency basis, determine whether such items are suitable to be added to the MSPV-NG formulary, and work with SAC to make any suitable items available via MSPV-NG. (Recommendation 10)